China became the second biggest art market in the world in 2017 on the back of a sharp jump in the number of Chinese US dollar billionaires, according to the just published Art Basel and UBS Global Art Market Report. The closely watched report documented a global recovery in the market, skewed heavily towards works valued at over US$1 million.

Using a variety of sources, art economist Clare McAndrew calculated that global art sales reached US$63.7 billion in 2017, up 12 per cent from 2016, and a strong turnaround after two consecutive years of decline. But the market is truly a 1 per cent club dominated by the super-wealthy.

Last year artworks that fetched over US$1 million accounted for only 1 per cent of the market by volume but a staggering 64 per cent by value – up from 48 per cent in 2016.

Of the three most expensive paintings sold last year, two are likely to have been bought by Asians: Qi Baishi’s Twelve Landscape Screens (1925), which sold for US$141 million at Poly Beijing, and Jean-Michel Basquiat’s Untitled (1982), which went to a Japanese collector for US$110 million.

The third of those pieces was Leonardo da Vinci’s Salvator Mundi, bought by the Abu Dhabi Department of Culture and Tourism for US$450 million, making it by far the most expensive artwork ever sold at auction.

Art sales in China, including Hong Kong, rose by 14 per cent last year, and accounted for 21 per cent of the global art market, up from 20 per cent in 2016. That knocked the UK back to third place for the first time since 2014.

McAndrew says China’s appetite for art is related closely to a more than doubling in the number of dollar billionaires in the country last year – to around 580 according to an estimate by Swiss bank Credit Suisse, up from 221 in 2016. Last year 26 per cent of the world’s billionaires were Chinese.

Of the world’s top 200 collectors, nine were in China last year, and a further three in Hong Kong.

Asia excluding China remains a small market for art, accounting for just 2 per cent of total global sales, but that figure is forecast to rise strongly given that the number of billionaires in the region surpassed the number in the United States in 2016 and that, according to a forecast by UBS, a Swiss bank, a new billionaire will be minted in Asia every two days.

McAndrew warned that late payment or non-payment by art buyers in China is getting worse. Only 51 per cent of the value of art sold at auction there was fully paid, down from 70 per cent in 2013-14, according to the Chinese Auctioneers Association.

The decline is partly due to questions about the authenticity and provenance of lots purchased, she said. In January, police in China made a number of high-profile arrests over fake artworks, attributed to Chinese masters, that were sold through auction houses there.

The US dominance of the art market grew in 2017, accounting for 42 per cent of sales by value, up from 40 per cent in 2016. Dealers in the country surveyed for the report were the most optimistic about sales over the next five years, with 65 per cent predicting they would increase and none expecting them to decline.

Similarly, no dealer in China thought sales would fall in the future, but 64 per cent expected demand to be flat. The UK market, which had 20 per cent of sales last year, will suffer if art cannot be traded freely with the European Union after Britain’s exit from the bloc in March 2019, but it is protected by the fact that 97 per cent of its art exports currently go to countries outside the European Single Market, the report says.

Globally, roughly half of all the art sold in 2017 was transacted privately through dealers; China was the only major market to buck this trend, with auctions still accounting for nearly 70 per cent of sales.

This could change, however, as more high-end galleries open in Hong Kong, according to McAndrew. She highlighted the potential impact of dealers taking up gallery space in H Queen’s, a high-rise block in Central whose design is tailored to meet the needs of art dealers.